Cape Town - President Cyril Ramaphosa said on Thursday that government would support the balance sheet of the troubled State-owned power utility Eskom, but said that this would be done without burdening the fiscus with unmanageable debt.
"Government will support Eskom’s balance sheet, and the Minister of Finance will provide further details on this in the Budget Speech. This we will do without burdening the fiscus with unmanageable debt," Ramaphosa said.
"As we address the challenges that face Eskom, we also need to safeguard our national fiscal framework, achieve a positive impact on our sovereign credit rating and pay attention to the rights and obligations of Eskom’s funders."
This as Ramaphosa, during delivering his second State of the Nation Address in Parliament, said Eskom would need to develop a new business model in a bid to ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years’ time.
Eskom is expected to post a R20.1 billion loss for the financial year to March from the R15 billion forecast at its mid-year results as overall expenses widened during the period. The power utility also has a mounting debt which stands at more than R400 billion.
Ramaphosa said Eskom had come up with the nine-point turnaround plan and had taken urgent steps to reduce significantly its costs.
"To ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years’ time, Eskom will need to develop a new business model," Ramaphosa said.
"This business model needs to take into account the root causes of its current crisis and the profound international and local changes in the relative costs, and market penetration of energy resources, especially clean technologies."
In line with this turnaround plan, Ramaphosa said government will immediately embark on a process of separating the power utility and establishing three separate entities – generation, transmission and distribution – under Eskom Holdings.
"This will ensure that we isolate cost and give responsibility to each appropriate entity. This will also enable Eskom to be able to raise funding for its various operations much easily from funders and the market," he said.
"It is imperative that we undertake these measures without delay to stabilise Eskom's finances, ensure security of electricity supply, and establish the basis for long-term sustainability."